failure of the world economic system

FAILURE OF THE WORLD ECONOMIC SYSTEM!

DID YOU REALISE ?!

THAT WE ARE PLUNGING TO AN ECONOMIC RECESSION ?!

Recession [ri-sesh-uhn]!noun!

• Period of time during which there is little trade, business activity, and wealth than usual!

Economic recession!

Productivity plummets!

People lose jobs

?

Soon people can’t feed themselves!

WHAT ARE THE SIGNS?!

?

THE EUROPEAN DEBT CRISIS!

Debt to Gross Domestic Product ratio, GOLDEN RULE = 60%!The worrying level of DEBTS !!!!

Source: Authors calculation using Tradingeconomics.com (2012)!

The huge GAP between the poor and the rich !!!!Global income distribution by population quintiles 1990, 2000, and 2007!

Source: Isabel Ortiz (2011)!

THE RAPE !OF THE EARTH!

Actually there are many more signs…!

Expensive education fees!

People losing jobs!

Crime rates!

Expensive health fees!

Corruption!

Political instability!

Currencies loss of buying power!

Bankruptcy!

Foreclosures!

The 2008 subprime mortgage!

Poverty!

And many more….. You can look around to find it yourself !!

Inflation!

You can’t leave the economy alone!

Economy!

Social & Politics!

Science & Technology!

Politics!

Environment!

Because the subsystems affect each other, but we will get through the economy anyway !!

Culture!

THE AGENDA!• Introduction!• What is money ?!• Creation of Fiat Money!• Why Fiat Money Fail!• Solution!

To truly understand the problem we must also understand the concept of MONEY!

Money can be anything that humans accept!

Three basic functions of money:!!• Medium of exchange!• Unit of account!• Store of value!

Before money there was the!AGE OF BARTER!

COMMODITY MONEY!Money which has intrinsic value, meaning it is worth something in it’s own right!

Cowrie shells China 1200 B.C.!

Roman gold coin 1st century A.D.!

REPRESENTATIVE MONEY!Money that does not necessarily have the intrinsic value that it represents, but is backed and could be redeemed by the equal value of commodity money!

Banque Generale banknote 1718 A.D.!

FIAT MONEY!Money that has no intrinsic value and is not backed up by the equal value of commodity money, but is made legal tender through government decree!

The U.S. dollar!

HISTORY OF MONEY!Notable events and discoveries of money!

Year! Event!

1200 B.C.! Cowrie shells are used as money in present day China!

500 B.C.! Gold coins are used in Lydia present day Turkey!

618 A.D.! A form of paper money is used in present day China!

1000 A.D.! Invention of fractional reserve banking in England!15th century A.D. ! First form of modern day banking emerged in Italy!

1816 A.D.! England adopted the gold standard!1944 A.D! The Bretton Woods conference!1971 A.D.! The Smithsonian agreement!

Now, we are mainly on the fiat money system while actually it is

the greatest SCAM ever !!!!

FIAT MONEY is the official money of any government!

Expenditure! Income!

BANKS created the fiat money not the government !!

Government!Central Bank!

Community!Commercial Bank!

Central Bank!Government!

They print money out of THIN AIR and charge INTEREST to the government !!

Fiat Money!

Government bond!

Commercial banks also created fiat money through the fractional reserve banking!

Commercial Bank!

Loan!

Debt!

Community!

Through fractional reserve banking, banks can give loan up to 9x their reserves !!

QUOTES!

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before morning.”!!- Henry Ford!

In other words money is DEBT!Without debt, money do not exist!

Central Bank!Government!

Community! Commercial Bank!

Government bond!

Fiat Money!

Debt!

Loan!

They created the PRINCIPLE but the INTEREST was never created!So, the amount of debt must exceed or at least in the same amount of principle + interest created!

Debt!Principle + Interest!

(P + I)!

If the P + I needed exceeds the debt in the system the economy will CRASH !Because there isn’t enough money to pay all the debts !!

QUOTES!“If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.”!!- Thomas Jefferson!

With fiat money and fractional reserve banking they receive UNFAIR profits!Because they created a little value but received a lot of value !!

Goods & Services!

Principle!

P + I!

Bankers and a few businessman receive the most benefit from this system!As fiat money flows into our society, first few money holders can buy at a normal price while most of the people buy at an inflated price. WHY ?!

The Consumer Price Index of USA 1913-2008!The insane growth of INFLATION !!!!

Source: Authors calculation using Inflationdata.com (2012)!

Because not all of the money increases production instead it is spent in DERIVATIVES!Comparison between annual OTC derivatives and world GDP!

Source: Authors calculation using IMF (2012) and ISDA (2011)!

This is actually a SILENT THEFT of wealth by the GREEDY FEW to the people !!

QUOTES!

“At the end fiat money returns to its inner value—zero.”!!- Voltaire!!

Failure history of the fiat money!

• Roman Denarius (54 A.D.)!• Chinese Paper Money (1200 A.D.)!• French Livres (1715 A.D.)!• US Continental (1775-1780 A.D.)!• French Assignats (1789 A.D.)!• Weimar Inflation (1919-1923 A.D.)!

Shall we learn from history ?!

Because it’s a treason to the value!

=

=

Genuine Value!

Forced Value!

Because it gives power to create almost unlimited amount of money!

Excessive amount of money in the market!

= INFLATION !!!

The Consumer Price Index of USA 1913-2008!The insane growth of INFLATION !!!!

Source: Authors calculation using Inflationdata.com (2012)!

In the 1950s!

Now!

With US $ 34.72 you can buy a suit!

With US $ 34.72 you can’t buy a suit !!

The Inflation Case: Fiat Money!

In the 1950s!

Now!

With an ounce of gold you !can buy a suit!

With an ounce of gold you can still !buy a suit !!

The Inflation Case: Gold!

Fiat money FAILED to serve as a store of value ! While GOLD served better!

Three basic functions of money:!!• Medium of exchange!• Unit of account!• Store of value!

QUOTES!

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”!!- Adam Smith!

THE AGENDA!• Introduction!• What is money!• Creation of Fiat Money!• Why Fiat Money Fail!• Solution!

Solution!

Return to the “HONEST” money!

Cut unnecessary spending!

Be productive!

Government as the creator of money!

We must revert back to our HONEST money system !Precious metals are by far the best. We can blend the full reserve and digital money methods.!

Bring back the power to create money to the GOVERNMENT!Let us create a debt free money system !!

Cut unnecessary spending !!Stop these needless wars !!

Be Productive !!It’s not the amount of money but it’s the equality between goods & services and the amount of money!

QUOTES!

“The world suffers a lot.!Not because of the violence of bad people,!But because of the silence of good people !”!!- Napoleon Bonaparte!!

THE END!

THANK YOU FOR YOUR ATTENTION !

failure of the world economic system

Economy & Finance